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Black Money & The Economics Around It

Are there any provisions in UN which can help us chase black money?

Yes, there are a few. And they might help us get black money back in India. Let’s look at the history of such negotiations to learn more about them and hone your understanding for Probable questions for IAS Mains.

Tough negotiations on this subject in Vienna, Austria, in 2003 was a vital part of the United Nations Convention Against Corruption (UNCAC).

The first breakthrough came when the group established asset recovery as a “fundamental principle” of the convention.

Then it was only a matter of laying a framework, in both civil and criminal law, for tracing, freezing, forfeiting and returning funds obtained through corrupt activities.

What did the convention accomplish? Legal obstacles should be tackled with international cooperation rather than by domestic laws.

Some of the relevant provisions of the convention are crucial to the question of recovery of assets.

It provides that each state party shall take such measures as may be necessary to permit its competent authorities to give effect to an order of confiscation issued by a court of another state party.They are also required to share information with the competent authorities of another state, when necessary, to investigate, claim and recover proceeds of offences.

The UN, through its Office on Drugs and Crime, which leads the fight against illicit drugs and international crime, has been given the responsibility to implement the convention, particularly its assets recovery provisions.

Refining India’s approach

In the case of India, difficulties may have arisen not in establishing that the sums amassed abroad belong to India, but in proving that the assets were illegally obtained.

There is a need of domestic management and disposal of seized and confiscated assets and the management of the return and disposal of assets recovered in the context of international corruption cases.

Dr V……cud we add a point?…. while writing mains answer…….regarding d tax regime prevalent in India which is based on d OECD model which highly favours d MNCs who r also responsible for illict capital outflows (accrdng. to GFI report)……rather we shud go for UN model taxation prescribing ‘tax deduction at source’….colours of it are felt in d recently announced equalisation levy by d centre.

Mains level: The article gives important facts on the reasons behind increasing invisible money in Elections.

News

Context

The article is regarding the reforms suggested by Election and Law Commission, and Government’s non-compliance on them

This non-compliance is increasing Invisible money in Elections

Power given to EC, under the RP Act

The Election Commission (EC) works in accordance with
(1) Article 324 of the Constitution of India,(2) the Representation of the People Act (RP Act), 1951(3) the rules framed by the government thereunder, and various judgments of the Supreme Court and High Courts

The power to frame rules under the RP Act has not been givento the EC by successive governments

Status of reforms suggested by the EC

E.C sent 22 proposals in 2004

In December 2016, it sent 47 proposals including those for “Election expenses and election petitions”, “Election campaign and advertisements”, and “Reforms relating to political parties”

There are also instances where the Supreme Court has directed reforms in its decisions, but parliament made laws to prevent implications of the judgments

Most of the reform proposals by the EC have not been acted upon

Two proposals by the government in this budget which increase invisible money in Election

(a) to remove the limit of 7.5% on profits that a company can donate to a political party, and(b) to remove the requirement that the company making a donation to a political party disclose the name of the party and the amountdonated

Suggestions by the Law commission

A logical and simple way of introducing financial transparency and accountability in the working of the political parties is recommended by the Law Commission

Suggestion: is to bring political parties under the Right to Information (RTI) Act, 2005

The Central Information Commission (CIC) had also said in a full bench decision in June 2013 that six national political parties were indeed ‘public authorities’ under the RTI Act

Why: Because they fulfilled all conditions specified in Section 2(h) of the RTI Act which defines ‘public authority’

Reaction from Political Parties: Despite this decision, political parties, including the ruling party now, refused to accept RTI applications

November 29, 2016

Tax defaulters get another chance

What: The Centre introduced a Bill in the Lok Sabha that gives tax defaulters an opportunity to come clean by paying tax and penalties

Key feature of the proposed amendment to the Income-Tax Act is a proposal to impose 50% tax on undeclared income that is voluntarily disclosed till Dec 30

After that 82.5% (75% tax and 10% of such tax as penalty) could be levied on undeclared income detected by authorities

The tax changes are intended to supplement the demonetisation move targeted at curbing black money

The proceeds will be made a part of the Pradhan Mantri Garib Kalyan Yojana

They will be used to fund schemes for providing irrigation, housing, toilets, infrastructure, primary education, primary health and livelihood

Note2students:

This development indicates a sustained effort on the part of the govt against black money. Make notes of such developments, it helps to enrich mains answers. Also note the Pradhan Mantri Garib Kalyan Yojana.

October 17, 2016

SIT moots independent ED probe into money laundering

New recommendation: The Special Investigation Team (SIT) on black money has recommended that money laundering investigations by the Enforcement Directorate (ED) should be allowed without any dependence on registration of cases by other agencies.

Background: The Prevention of Money Laundering Act (PMLA) at present provides that the ED can pursue only those cases which have been registered by agencies like the Central Bureau of Investigation (CBI), State police units and the Income-Tax Department.

Previous recommendations: Based on the SIT’s recommendations, the Central government had earlier brought in some crucial amendments to the PMLA, apart from the Income-Tax Act and the Foreign Exchange Management Act.

These were to strengthen the legal framework for effective action against those holding unaccounted income.

A latest amendment to the PMLA empowers the ED to continue with the money laundering investigations even if the police case is closed in the court.

The ED can still pursue the probe into a financial angle and file a separate charge sheet.

October 4, 2016

[op-ed snap] Progress in black money amnesty scheme

Theme: Record collections under the Government’s black money amnesty scheme.

What worked this time: Tax department’s focus on demystifying and propagating the scheme.

The tax department actively monitored high-value transactions that took place without PAN card details and sent letters to suspected evaders based on the information.

Stern warnings from the Prime Minister himself about tough action and possible jail terms for tax evaders.

Other steps being taken to uncover black money: Tax havens where Indian holdings have come to light are being actively pursued.

The way ahead: The tax department must spruce up its data-mining methods to expand the country’s shallow tax base.

The government needs to attack the root cause of the problem by making electoral funding transparent, curbing the misuse by the wealthy of tax-free income sops for farmers, and encouraging cashless transactions.

October 3, 2016

Rs. 65,250 cr. mopped up via new black money window

What? Union Finance Ministery announced that the Central Board of Direct Taxes (CBDT) had received total disclosures of Rs. 65,250 crore under the Income Disclosure Scheme, 2016 in the form of cash and other assets

The four-month window under the scheme for declaring undisclosed income or black money that had escaped assessment closed on 30th Sept midnight

Earlier: The Voluntary Disclosure Scheme of 1997 had mopped up Rs. 9,760 crore in taxes at an average of about Rs. 7 lakh per declarant

The VDS, unlike IDS, had not penalised the declarents and allowed them to value the assets declared at the market prices of 1987 rather than current rates